CDW 2006 Annual Report Download - page 5

Revenue growth for the public sector was 15.0 percent, which soundly outpaced market growth.
However, partially due to the increase in sales force headcount, the public sector’s operating
margin of 4.9 percent was lower compared to 5.9 percent a year ago. We expect to leverage
our 2006 sales force investments in 2007.
Another milestone event that expanded our platform for growth was the acquisition of Berbee
Information Networks Corporation in October 2006. One of the nation’s largest IT solution
providers, Berbee offers best-in-class engineering capabilities in advanced technologies primarily
across the Cisco, IBM and Microsoft platforms. Berbee is a national gold certified partner with
Cisco, a premier business partner with IBM authorized to sell all IBM server and storage lines,
and has six Microsoft gold certifications. Berbee has 11 offices and two data centers in six
Midwestern states and is a separate operating segment of CDW.
One of our industry’s fastest growing categories is advanced technology solutions. The addition
of Berbee augments our ability to compete in this category with solution-based offerings,
while meeting our customers’ more complex business requirements. Berbee’s IT solutions and
engineering capabilities enable us to offer more advanced technology platforms including
network infrastructure and unified communications, systems and storage, security, productivity
applications and managed services. Berbee enhances our ability to expand our customer base,
capture a greater share of our customers’ IT spending and increase our addressable market.
We are extremely pleased to have Berbee as a CDW company. We will focus significant effort on
expanding the Berbee platform on a national basis, both organically and through acquisitions.
December 2006 marked the one-year anniversary of operations at our new 513,000 square
foot Western Distribution Center in North Las Vegas, Nevada. By the end of 2006, we shifted
approximately 30 percent of our total shipping volume from our legacy distribution center in
Vernon Hills, Illinois, to the Western Distribution Center. We will continue to focus on driving
more volume through the Western Distribution Center, as we still have plenty of capacity and
need to further leverage our investment in this state-of-the-art facility.
Strong vendor partnerships are fundamental to our ability to offer customers the right
technology products when they need them, and we continued to build these relationships in
2006. First, we optimally aligned our marketing and purchasing functions to better support our
sales organization and make it easier for partners to do business with us. Second, as a result of
the sales force geographic realignment, our partners in each region now have dedicated CDW
sales teams for both the public and corporate sectors. This has resulted in vendors bringing us
into more sales opportunities at earlier stages, which supports our pipeline and gives us an
advantage to win incremental business.
Several of our key financial metrics continued to be strong in 2006. Cash flow from operations
was $217 million, return on equity was 20.7 percent, and return on invested capital was
33.9 percent. We returned approximately $268 million to shareholders through share
repurchases and dividends, and we invested in our future growth by acquiring Berbee for
approximately $186 million.
Investment Highlights:
• Well positioned to profitably gain
market share in a fragmented industry
• Diverse product mix and
customer base
• Acquisition of advanced
technology solution provider
Berbee Information Networks
creates platform to expand
Berbee’s industry-leading
model and leverage cross-selling
opportunities with CDW customers
• Solid financial performance, cash
flow and ROIC; no debt
'05'04'03'02 ‘06
$128 $101 $116
$268
$300
$200
$100
0
$293
Growth Strategies
• Capture greater share of
customers’ spending
• Expand customer base
• Grow addressable market
• Optimize sales and
marketing model
• Provide unmatched customer
experience
• Do things better, faster, cheaper
• Drive market advantage through
coworkers and culture
Capital Returned to
Shareholders (in millions)